For over 5 years, you can no longer refinance* a mortgage for more than 80% of the market value of a home. Over the last 15 years, we have noticed that many of our clients return to our offices seeking mortgage refinancing in order to consolidate their debts. Sometimes this would occur only months after the initial purchase of the home. Often, this was due to the fact that the new owners had updated their homes, installing new hardwood floors, finishing the basement, putting in a new kitchen or bathroom. However, they made these improvements using their credit cards or personal lines of credit.

Before the recent changes, it was easy to refinance a mortgage, since property values were increasing rapidly and a home could be refinanced to 95% of its market value. Since this is no longer the case, it is difficult for homeowners to refinance their home, especially if they only made a 5% down payment. It can take up to 8 years to accumulate enough equity to be eligible.

Because no one wants to pay high interest rates on credit cards (11%-19%) or even 7% on a personal loan, future homeowners must plan their renovations carefully before buying the property.

The purchase & renovation program offered by the Canadian mortgage insurers (CMHC and Genworth) allows you to add the renovation costs to your mortgage.

Here is an example: You have just visited a beautiful home in a great neighborhood. It's close to schools, has a beautiful yard and is in overall good condition. However, the kitchen and bathroom are very outdated and ruin the look of the home. The solution is simple, you get an estimate for the work and that amount will be added to the mortgage. Just be sure to have the estimates done before buying the home and signing the mortgage. You must inform your mortgage broker of your intention to renovate so we can inform the bank ahead of time. If you don't, then you have to refinance, and all the aforementioned rules apply.

*Refinance: to negotiate a new mortgage on your property in order to access the accumulated equity.

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